TaxTMI 
TaxTMI 
2023 (10) TMI 1445
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....business of advertising in print, electronic media, hoarding and creative art work. It belongs to Gauti Group. The assessee along with other group concerns/family members was subjected to search operations under section 132 of the Act on 09-03-2015 by the Investigation wing of the Income tax department. Consequent thereto, the assessments were completed in the hands of the assessee for the above said year under section 143(3) read with section 153A of the Act. 3. The Kolkata investigation wing of the department had reported that many paper companies are indulging in providing accommodation entries in the form of share capital/share premium to various beneficiaries. It was noticed by the department that the assessee's group has received share capital/share premium from such paper companies. The details of the share capital received by the assessee during the year under consideration herein are given below:- S. No. Name of Subscriber Capital Premium Total 1 Starpoint Dealers P Ltd 39,70,000 6,74,90,000 7,14,60,000 2 Morepan Merchant P Ltd 33,30,000 5,66,10,000 5,99,40,000 3 Zenstar Marketing P Ltd 44,40,000 7,54,80,000....
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...., viz., Identity of the lender, Genuineness of transactions and Credit worthiness of the lender by producing documents like Incorporation certificate, PAN card, bank statements and financial statements of the creditors. It was further submitted that these companies are engaged in the business of share trading and all the transactions related to the same may be verified from the financial statements of the said companies. It was also submitted that the Share premium is a capital receipt and it has been received as per the private negotiations made between the assessee and share subscribers. It was further submitted that the Companies Act has put in restrictions with regard to the usage of share premium amount. Accordingly, it was contended that the addition u/s 68 could not be made. 8. The assessing officer did not accept the contentions of the assessee. The AO, after referring to various case laws, held that the share application money received by the assessee is unexplained. It is pertinent to note that M/s Starpoint dealers P Ltd and M/s Morpan Merchant P Ltd have invested the impugned amount in the assessee company, out of funds received by them from other group companies. Th....
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....respective addresses. All of them have not responded to the notices issued by the AO. Accordingly, the Ld CIT (A) held that the assessee has failed to discharge the onus placed upon it. 11. However, the Ld CIT (A) noticed that he had confirmed the additions made in the hands of M/s Starpoint Dealers P Ltd and M/s Morpan Merchant P Ltd. Accordingly he held that the protective addition made in respect of addition relating to the share capital received from them will not survive. Accordingly, the Ld CIT (A) directed that the share capital of Rs. 7,14,60,000/- received from Starpoint Dealers P Ltd and Rs. 5,99,40,000/- received from M/s Morpan Merchant P Ltd be deleted. The relevant observations made by Ld CIT (A) are extracted below:- "5.59 Admittedly, the assessment of Starpoint Dealers Pvt Ltd and Morpan Merchant Pvt Ltd has been carried out together with this assessment. The unexplained credits appearing in these two companies during the entire block period has been treated as income of these companies in respective years. The appeal of these years was pending with this office and it is noted that in respect of the credit entries which relate to Kolkatta based....
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....bank account details evidencing credit of this amount in the bank account of Zenstar and debit of the amount in the bank account with subsequenty credit in the bank account of Inter publicity are available on record. The identity and creditworthiness of Sumatichand Gouti or M/s SCG Exports Pvt Ltd remains well established. It is noted that the AO has merely restricted himself to the issue of identity and has not extended the investigation to source of funds in the hands of the investor company. It has been held by Hon'ble Supreme Court in the case of NRA Iron & Steel (P) Ltd (2019)(103 taxmann.com 48)(SC), has stressed upon the need to examine the creditworthiness of the investor companies in case of doubt about these companies. 5.62 In light of the various documents submitted by the appellant as discussed above and the fact that the credit arose out of the funds of Sumati Chand Gouti and M/s SCG Exports Pvt Ltd, the source of credit is found to be suitably explained. The amount credited in the books of the assessee cannot be treated as unexplained credit under such circumstances. As such, the AO is in error in making the addition under section 68 of the Act in this case. ....
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....ts from their bank accounts through account payee cheques, these transactions cannot be treated as bogus. Since the payments have been made from of funds available with them, the credit worthiness would also stand proved. We notice that the AO has observed that these subscribers are either showing loss or meager profits and such meager profits are not commensurate with the investments made by them. However, there is no bar under the law that a person could not make investments out of borrowed funds. In the instant case, it is not the case of the AO that the applicants did not have funds available with them for making investments in the assessee company. In fact, the said investments have been routed through the bank accounts of the assessee as well as the subscribers. Further, these investments are duly reflected in their books of account. 15. We notice that the tax authorities have first relied upon the surrender made by Shri Sumati Chand Gouti and Shri Sanjay Dugar in the statement taken u/s 132(4) of the Act during the course of search. We noticed earlier that the assessee is contending that Shri Sanjay Dugar was not a director during the period in which the search has taken ....
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....decision rendered by the Coordinate Bench in the case of M/s. Moraj Realty Pvt. Ltd. (ITA No. 708 & 709/Mum/2019 dated 08-12-2020), wherein the decision was rendered by following the decisions rendered by Hon'ble Bombay High Court. It was held as under :- "17. Moreover, except for relying on the statement of VVB the Assessing Officer has not done any inquiry himself except for referring to a notice issued under section 133(6) in A.Y. 2009-10 only. The learned counsel of the assessee has challenged the very veracity of this observation. He has submitted that assessee has asked for the copy of the said notice issued under RTI Act. In response it was replied that copies thereof are not available. Hence, this shows that even the so called inquiry by the Assessing Officer was done in case of only one party for A.Y. 2009-10 and the veracity of which is itself in doubt. 18. We find ourselves in agreement with the submissions of the assessee's counsel. We note that except for the statement of the entry operator which was also retracted the addition made by the authorities below is devoid of cogent material. In this regard we note that in similar circumstances honoura....
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....aw. It does not entitle the Revenue to add the same to the assessee's income as unexplained cash credit. 20. Similarly Hon'ble Bombay High Court in the case of CIT Vs. Apeak Infotech (397 ITR 148) has held as under :- "Amendment to Section 68 of the Act by the addition of proviso thereto took place with effect from 1st April, 2013. Therefore, it was not applicable for the subject Assessment year 2012-13, So for as the pre-amended Section 68 of the Act was concerned, the same cannot be invoked in this case, as evidence wasled by the Respondents- Assessee before the Assessing Officer with regard to identity, capacity of the investor as well as the genuineness of the investment Therefore, admittedly, the Assessing Officer did not invoke Section 68 of the Act to bring the share premium to tax. Similarly, the CIT(A),on consideration of facts, found that Section 68 of the Act cannot be invoked, in view of the above, it was likely that the Revenue may have taken an informed decision not urge the issue of Section 68 of the Act before the Tribunal. High Court may also point out that decision of High Court in Major Metals Ltd. vs. Union of India, 359 ITR 450 proceeded o....
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....ill not have retrospective effect and would be effective only from Assessment year 2013-14. In view of the above, Question No .B as proposed also does not give rise any substantial question of law as it is an issue concluded by the decision of High Court in M/s Vodafone India Services Pvt. Ltd. (Supra) and in the Apex Court in M/s G.S. Homes & Hotels P. Ltd. (supra). Thus not entertained. " 21. Accordingly in the background of aforesaid discussion and precedent in our considered opinion assessee has given all the necessary details required for establishment of identity creditworthiness and genuineness under extant provisions of section 68 of the IT Act. The onus cast upon the assessee stands discharged. The addition by invoking amended provisions of section 68 of the Act which are not applicable for the assessment year is not sustainable." 19. The Hon'ble Bombay High Court has held in the case of CIT vs. Orchid Industries (P) Ltd (397 ITR 136)(Bom) that the addition u/s 68 could not be made once the assessee had produced the documents to prove the cash credits. It was further held that non-appearance of the share subscriber before the AO will not change this position. I....
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.... 7. The Appellants have failed to explain as to how such Companies have been assessed though according to them such Companies are not existing and are fictitious companies. Besides the documents also included the registration of the Company which discloses the registered address of such Companies. There is no material on record produced by the Appellants which could rebut the documents produced by the Respondents herein. In such circumstances, the finding of fact arrived at by the authorities below which are based on documentary evidence on record cannot be said to be perverse. Learned Counsel appearing for the Appellants was unable to point out that any of such findings arrived at by the authorities below were on the basis of misleading of evidence or failure to examine any material documents whilst coming to such conclusions. Under the guise of the substantial question of law, this Court in an Appeal under Section 260A of the Income Tax Act cannot re-appreciate the evidence to come to any contrary evidence. Considering that the authorities have rendered the findings of facts based on documents which have not been disputed, we find that there are no substantial question of law w....